South Carolina property tax (non resident)

[Sean Hoglund]

Can someone tell me if I am missing something. I thought it was simply the difference on percentage of appraised value (4% vs 6%). But the bigger issue is the nonresidents (or a 2nd house) have to pay all the school tax! For example a rental house I am interested in (in Lexington) is listed for $187,000. The previous years appraised value is $154,323. Annual property tax on it if you are a resident (and its your primary house) is $960. If it is a 2nd home or you are a nonresident, the annual tax is $4,592!!

Assuming this is correct, how are investors able to get decent cash flow out of a rental?

I used this calculator to verify the amounts : https://lex-co.sc.gov/services...

information below if from : https://realestatescorecard.co...

Real Estate Taxes

South Carolina taxes on residential real estate can vary quite a bit depending on where you live and if your home is your primary residence, or a second home or rental property. For primary residences, taxes paid equal 4% of the fair market value of the home times the local millage rate plus any other local district taxes assessed, such as for fire or police, but with a school district tax credit. Non-primary residence owners pay the local millage on a rate equal to 6% of fair market value plus district taxes and are not exempt from paying school district taxes. Resident homeowners aged 65 and older or disabled can receive a $50,000 exemption against fair market value.

In North Carolina, residential real estate is also taxed on an ad valorem basis, with each county administering assessments and collections. Rates vary by county, and are applied to 100% of assessed value (values are determined by the assessor’s office). As an example, Brunswick County’s current rate is 48.5¢ per $100 of value. On a $350K home, the tax will be $1,570. Municipalities may add additional taxes to this, so you’ll want to contact the county tax assessor-collector office to determine current rates for a specific area. Homeowners age 65 and older or the disabled who meet certain income limit requirements can receive breaks on their property taxes in North Carolina.

Transfer taxes on the purchase or sale of homes in North and South Carolina are also different. In North Carolina, the transfer tax is $1 per $500 of sale price; however, in a few counties an additional amount (up to $5/$500) can be added. South Carolina imposes a deed recording fee of $1.85 per $500 regardless of county. In both states, the transfer taxes are typically paid by the seller, but terms may vary.

[Brian Poirrier]

@Sean Hoglund  Assuming the prior years tax value is lower than your purchase price as in your example, you want to file your ATI Exemption before Jan 31st following your closing date at your county's Assessors office.  This gives you up to 25% reduction on your taxable value but not more than the prior value.  Also be careful as 2019 was a reassessment year so the coming tax bill may already be higher than 2018 was.

For your example, 75% of $187,000 is already lower than the prior taxable value of $154k, landing at $140k.  So filing your ATI Exemption would keep your next taxable value rate at the recent value of $154,323.  However you still have the 6% rate instead of the 4% rate which is $9,259.38 which is not the bill amount but than times the millage rate for that area plus any surcharges for trash depending on the neighborhood and town limits.

A safe assumption without verifying an address with the county is an effective millage rate of about 500 which means the tax bill should be about $4,629, which is still slightly better than not applying for the ATI and on $187k, 6% is $11,220 and a tax bill of $5,610. Disclosure: I have only done this with MFR properties but according to the state it should be acceptable with SFR property as long as you claim holding it solely for investment and not your personal residence as you would already get a better deal.

A few other slight perks of SC compared to some other states is the taxable value is not retroactively applied.  Therefore if you purchase in say September, your current years tax bill will be based on the current years value which may be even lower than what you can achieve with the exemption and on investments the value will be updated according to your ATI and will not be reassessed by the county for five years as well as once it is, the increase is capped to a 15% increase in value which is not common and can be appealed which is less often than many other states.

Yes, the effective tax rate comes out to a difference of say 0.5% on personal residence to 3.0% on investments, but I would say handling it the right way up front and budgeting for it in your analysis is better than risking it another way.